Debt Ratios for Home Financing
Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts are paid.
About your qualifying ratio
Usually, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).
The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt. Recurring debt includes things like car loans, child support and credit card payments.
Some example data:
A 28/36 qualifying ratio
- Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
- Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
- Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses
If you want to run your own numbers, use this Mortgage Loan Pre-Qualification Calculator.
Just Guidelines
Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how large a mortgage loan you can afford.
At AmeriBest Mortgage, we answer questions about qualifying all the time. Call us: 3217777277.